This
contractor-default case involves two tiers of contracts,
bonds, sureties, and principals and the consequences that
follow when the lower-tier principal defaults. Defendant
Travelers Casualty and Surety Company of America moves to
dismiss plaintiff Fidelity and Deposit Company of
Maryland's sixth cause of action for statutory
violations, arguing that Fidelity has not alleged that it is
a contractor or standing in a contractor's shoes, so it
does not have standing to bring this claim.[1]I find that
Fidelity's first-amended complaint fails to allege facts
to support its standing to bring this claim and that its
claim for violations of NRS 338.400 et seq. is too vague to
put Travelers on fair notice of its nature. So I grant the
motion to dismiss with leave to amend.[2]

In
2010, Clark County School District (CCSD) contracted with Big
Town to install HVAC systems at five elementary schools. The
contract required Big Town to take out performance-and-labor
and material-payment bonds for the installation at each
school. Big Town obtained performance and payment bonds from
Travelers, and Big Town became the principal and CCSD the
obligee. In the event that Big Town defaulted on its
obligation under the contract, Travelers would complete Big
Town's performance.

Big
Town subcontracted with F.A.S.T. Systems, Inc.-a party that
is not involved in this coverage-dispute litigation-to work
on the HVAC-installation projects at each of the schools. The
subcontract required F.A.S.T. to take out
performance-and-labor and material-payment bonds, just as Big
Town had done for CCSD. F.A.S.T. obtained performance and
payment bonds from Fidelity, and F.A.S.T. became the
principal and Big Town the obligee. In the event that
F.A.S.T. defaulted on its obligation, Fidelity would complete
F.A.S.T.'s performance.

F.A.S.T.
defaulted on the project at all five schools, so Fidelity
hired Perini Building Company-another party that is not
involved in this litigation-to complete the projects and made
payments to Big Town in excess of $75, 000 under each of the
five bonds. Fidelity now sues Travelers and Big Town for,
among other things, violating NRS §§ 624.624
(Nevada's statute governing payment of lower-tiered
subcontractors) and 338.400 et seq. (Nevada's rules for
progress payments on public-works contracts) because they did
not pay Fidelity the remaining contract funds or give
Fidelity written justifications for withholding the payments.
Travelers argues that Fidelity has not pled enough facts to
show that it has standing to bring this sixth cause of action
and that its sweeping allegation that Travelers violated NRS
§ 338.400 et seq. does not give Travelers adequate
notice of which law or laws it violated. I agree, so I
dismiss this claim with leave to amend.

Discussion

A.
Motion-to-dismiss standard

Federal
Rule of Civil Procedure 8 requires every complaint to contain
“[a] short and plain statement of the claim showing
that the pleader is entitled to relief.”[4] While Rule 8 does
not require detailed factual allegations, the properly pled
claim must contain enough facts to “state a claim to
relief that is plausible on its face.”[5] This
“demands more than an unadorned,
the-defendant-unlawfully-harmed-me accusation”; the
facts alleged must raise the claim “above the
speculative level.”[6] In other words, a complaint must make
direct or inferential allegations about “all the
material elements necessary to sustain recovery under
some viable legal theory.”[7]

District
courts employ a two-step approach when evaluating a
complaint's sufficiency on a Rule 12(b)(6) motion to
dismiss. First, the court must accept as true all well-pled
factual allegations in the complaint, recognizing that legal
conclusions are not entitled to the assumption of
truth.[8] Mere recitals of a claim's elements,
supported only by conclusory statements, are
insufficient.[9] Second, the court must consider whether
the well-pled factual allegations state a plausible claim for
relief.[10] A claim is facially plausible when the
complaint alleges facts that allow the court to draw a
reasonable inference that the defendant is liable for the
alleged misconduct.[11] A complaint that does not permit the
court to infer more than the mere possibility of misconduct
has “alleged-but not shown-that the pleader is entitled
to relief, ” and it must be dismissed.[12]

B.
Statutory-violations claim

Fidelity
claims that Travelers and Big Town violated NRS §§
624.624 and 338.400[13] et seq. by “failing to respond to
[Fidelity]'s requests for payment of the remaining
contract funds, and specifically by failing to give written
notice to [Fidelity] of any objections to [Fidelity]'s
request and to provide written justifications for any
withholdings.”[14] Travelers argues that §§
624.624 and 338.400 et seq. provide rights and protections to
contractors and that Fidelity fails to allege that it is a
contractor within the meaning of the statutes.

Fidelity
responds that it is a contractor under the statutory
definition, but it doesn't need to be a contractor on its
own because it stands in the subcontractor's
(F.A.S.T.'s) shoes when asserting its
statutory-violations claims. Without disputing Fidelity's
ability to stand in a contractor's shoes,
Travelers simply argues that Fidelity did not adequately
allege in its statutory-violations claim that it is
standing in a contractor's shoes.[15] Fidelity
counters that it alleged in ¶ 56 of the first-amended
complaint that it “completed the FAST subcontracts and
is therefore also ‘in the shoes' of
FAST” and then incorporated that allegation into its
statutory-violations claim in ¶ 72.[16]

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fidelity
materially overstates its own allegation. Fidelity&#39;s
complete &para; 56 allegation reads: &ldquo;Fidelity
completed the FAST subcontracts and is therefore also
&lsquo;in the shoes&#39; of FAST in making its bond
claim.&rdquo;[17] Even though Fidelity incorporates ¶
56 through ¶ 72 into its statutory-violations claim,
¶ 56 expressly limits Fidelity's derivative-standing
allegation to its bond claim. So placing that
limited-standing allegation into its statutory-violations
claim does not result in Fidelity pleading in-the-shoes
standing for this statutory-violations ...

Our website includes the first part of the main text of the court's opinion.
To read the entire case, you must purchase the decision for download. With purchase,
you also receive any available docket numbers, case citations or footnotes, dissents
and concurrences that accompany the decision.
Docket numbers and/or citations allow you to research a case further or to use a case in a
legal proceeding. Footnotes (if any) include details of the court's decision. If the document contains a simple affirmation or denial without discussion,
there may not be additional text.

Buy This Entire Record For
$7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.